| Here are the definitions to help evaluate | | | | thousand dollars.How to exploit this anomaly |
| vehicle residual values | | | | in vehicle residual values in a Lease |
| | | | calculationThe easy way |
| Vehicle residual value | | | | |
| | | | On the Internet, search for any |
| This is the value that the manufacturer, not | | | | manufacturer's web site and simply find a |
| the dealer, says the car will be worth at the | | | | lease payment by focusing on any higher |
| end of the lease. Sometimes it is a percent, | | | | quality car costing a few thousand collars |
| such as 60% of the MSRP, the price of the | | | | more than your initial choice. Ignore the |
| car. A $20,000 car with a 60% vehicle | | | | fact that the residual value is not given. |
| residual value would have a residual value of | | | | What you're really after is a monthly lease |
| $12,000.The lease contract says you can rent | | | | payment on a Vehicle B that is the same, or |
| this $12,000 for x years by simply paying a | | | | almost the same, as the lease payment on the |
| percent, such as 4% of the $12,000, or .04 | | | | initial vehicle A that you chose.The hard way |
| times $12,000 divided by 12 months or $480/12 | | | | |
| equals $40/month Amortization | | | | To narrow your search for a secondary |
| | | | choice, be sure to limit it to a vehicle that |
| The $8,000 left (the $20,000 car price minus | | | | has a higher residual value percentage. |
| the $12,000 residual value) is a standard | | | | Because few car manufacturers will provide |
| loan, just like a house mortgage, which | | | | the residual value on the Internet, go to |
| requires a monthly payment for not only the | | | | other sites that do offer this information. |
| interest but also a little of the $8,000. | | | | To get the percentage residual value, divide |
| This will always be a much larger payment | | | | the vehicle residual value by the MSRP and |
| than the interest paid on the residual value. | | | | you have the percent. Example: 12,000/20,000 |
| | | | equals 60%.After initially deciding on what |
| | | | car to lease, get a lease proposal on a |
| | | | different make that costs as much as $5,000 |
| Here is where the magic is | | | | more. You can do a lot of this secondary |
| | | | searching on the Internet. Make sure each |
| Higher quality cars, such as a BMW or | | | | choice has similar features and that neither |
| Mercedes or Lexus, will always have a higher | | | | one is loaded with a lot of optional |
| relative vehicle residual value than a Chevy | | | | accessories. |
| or Pontiac or Dodge. That means that although | | | | |
| the interest paid on the higher quality | | | | |
| vehicle residual value is more than that paid | | | | |
| on the lower quality car, the monthly payment | | | | The next step is to actually visit the |
| paid on the depreciation is a lot less, so | | | | second choice dealer showroom and see if Car |
| that the sum of the two on a BMW can be the | | | | B meets your needs, such as comfort, room, |
| same as the sum (the lease payment) on a | | | | and any other requirements that led you to |
| lesser quality car.Use the resource box at | | | | pick vehicle A in the first place. Ignore its |
| the end of the article to see an actual | | | | price, because you're only concerned about |
| example of two vehicles having the same lease | | | | its monthly lease payment. |
| payment but differing in price by several | | | | |